Insurers evaluate medical exams, doctor records, motor vehicle reports, credit reports, and more to determine pricing and eligibility. Medical conditions (cancer, hear issues, depression, etc.) and habits (tobacco, drugs, speeding, etc.) usually come out.
An insurer may adjust the premium or decline coverage altogether if a misrepresentation or omission is identified before the policy is issued. The policy's contestable clause comes into play if the discrepancy is discovered after the policy is in force.
The contestable clause is a provision in the life insurance contract that identifies when benefit claims can be challenged. Two years from the issue date is common, but the period can vary by insurer or due to policy rider. Check your policy for specifics.
The insurance company may challenge a clam for death benefits during the policy's contestable period. The insurer may adjust the payout or even rescind the policy if a misstatement or omission on the application is discovered. The cause of death does not have to relate to the misstatement or omission.
Finally, keep in mind that a life insurance policy can be canceled at any time when there is evidence of fraud.